Post on 28-May-2020
Global Job Hunt:
Threats and Opportunities in California
Polling Questions
Which industry is most affected by outsourcing in California ?
1. Telecommunications
2. Accounting and bookkeeping
3. Data processing and related services
4. Computers and related products
5. Apparel design and related services
To create jobs in California we need to ?
1. Discourage foreign outsourcing with regulation
2. Cut corporate income taxes
3. Job-creation tax credits
4. Provide incentives to attract new firms
5. Improve education and workforce training
How can California be more competitive in global trade?
1. Lower business costs
2. Better export/import assistance for small firms
3. More highly educated/skilled workforce
4. Better state infrastructure
5. More incentives to manufacturing sector
Long-term Employment GrowthG-7 Countries, 1960 - 2002
Country1960
(Millions)2002
(Millions)
PercentChange
1960-2002
Canada 6.0 15.3 155.0%U.S. 65.8 136.5 107.4%Japan 43.4 62.7 44.5%Germany 25.7 36.0 40.1%France 18.3 24.3 32.8%U.K. 23.6 27.8 17.8%Italy 20.1 21.6 7.5%G-7 Total 202.9 324.2 59.8%
Current and Projected New JobsDue to IS Outsourcing, Selected Industries
Industry Group 2003 2008Natural Resources & Mining 1,046 1,182Construction 19,815 75,757Manufacturing 3,078 25,010Wholesale Trade 20,456 43,359Retail Trade 12,552 30,931Transportation & Utilities 18,895 63,513Publishing, Software & Comm -24,860 -50,043Financial Services 5,604 32,066Professional & Business Services 14,667 31,623Education & Health Services 18,015 47,260Leisure, Hospitality & Other Svcs. 4,389 12,506Government -3,393 4,203Total Employment 90,264 317,367
Net New Jobs
2015201020052000
3500
3000
2500
2000
1500
1000
500
0
2.5
2.0
1.5
1.0
0.5
0.0
Thousands Percent
Number of Jobs (L)% of Total US Jobs (R)
Projected Offshoring of U.S. JobsCumulative Jobs Outsourced
Offshoring Services Market Size2001, US$ Billions
Canada3.7
Mexico0.5
Ireland8.3
Israel3.0
South Africa0.01
India7.7
Eastern Europe*0.4
Russia0.2
China1.1
Philippines0.3
Thailand0.05
Australia0.4
*Includes Poland, Romania, Hungary, and Czech Republic
Offshoring OpportunitiesAcross the Organization
Back office Customer Contact
Common Corporate Functions
Knowledge services & decision
analysisResearch &
Development
• Basic data entry
• Customer relations
• Finance and accounting
• Portfolio analysis• Content
development• Transaction management
• Telemarketing • Procurement • Risk management• New production
design
Increasingly complex transactions
Increasingly access to highly skilled labor pool
Industries at Risk to OutsourcingUnited States Employment
Industry2001(Q1)(Thou.)
2003(Q2)(Thou.)
Percent Change
2001-2003Manufacturing 16,932.3 14,757.7 -12.8%Nonmanufacturing 114,141.3 115,757.7 1.4%All Nonfarm 131,073.0 130,515.3 -0.4%
Industries at Risk to OutsourcingCalifornia Employment
Industry2001(Q1)(Thou.)
2003 (Q2)(Thou.)
Percent Change
2001-2003Nonmanufacturing 12,759.2 12,904.6 1.1%Manufacturing 1,849.0 1,587.2 -14.2%All Nonfarm 14,608.2 14,491.8 -0.8%
Industries at Risk to OutsourcingUnited States Employment
Industry2001(Q1)(Thou.)
2003(Q2)(Thou.)
Percent Change2001-2003
Nonmanufacturing SectorsSoftware Publishers (except Internet) 276.1 247.9 -10.2%Internet Publishing and Broadcasting 50.6 33.7 -33.4%Telecommunications 1,323.4 1,138.9 -13.9%ISPs, Search Portals and Data Process 516.0 433.2 -16.0% Data Processing & Rel. Services 320.9 292.2 -8.9%Accounting, Bookkeeping & Payroll 976.3 875.7 -10.3% Payroll Services 158.9 124.6 -21.6%Computer Systems Design & Rel. 1,341.2 1,148.1 -14.4%Business Support Services 784.4 746.2 -4.9% Telephone Call Centers 406.2 363.2 -10.6% Telephone Answering Services 54.8 50.9 -7.1% Telemarketing Bureaus 351.4 312.3 -11.1%Manufacturing SectorsComputer and Electronic Products 1,862.1 1,415.9 -24.0% Semiconductors and Electronic 308.7 237.9 -22.9%Total At-Risk Industries 6,853.9 5,791.8 -15.5%
Industries at Risk to OutsourcingCalifornia Employment
Industry2001(Q1)(Thou.)
2003 (Q2)(Thou.)
Percent Change
2001-2003Nonmanufacturing SectorsSoftware Publishers (except Internet) 55.8 47.1 -15.6%Telecommunications 150.5 123.5 -18.0%ISPs, Search Portals and Data Process 60.2 48.0 -20.2% Data Processing & Rel. Services 24.4 18.9 -22.8%Accounting, Bookkeeping & Payroll 108.8 103.1 -5.2%Computer Systems Design & Rel. 218.2 163.2 -25.2%Business Support Services 56.2 57.2 1.7%Manufacturing SectorsComputer and Electronic Products 443.1 336.8 -24.0%Semiconductors and Electronic 162.1 115.2 -29.0%Total At-Risk Industries 980.8 774.6 -21.0%
San JoseCaliforniaU.S.
16
15
14
13
12
11
10
Percent
Regions at Risk to OutsourcingPercent of Total Employment, 2002
U.S. Jobs Moving OffshorePercent of U.S. Jobs Lost by Offshoring, 2000 - 2015
Annual WageOccupation 2003 2000 2005 2010 2015Management $82,790 0% 6% 7% 9%Legal Occupations $78,910 2% 2% 2% 2%Computer & Mathematical $63,240 26% 19% 17% 14%Architecture & Engineering $59,230 3% 5% 5% 6%Business & Financial Operations $55,500 11% 10% 10% 10%Life, Physical, and Social Science $53,210 0% 1% 1% 1%Arts, Entertainment & Media $42,620 1% 1% 1% 1%Sales & Related $31,250 4% 5% 6% 7%Office & Adminstrative Support $28,260 53% 50% 50% 50%
% US Offshoring Jobs
2015201020052000
10
8
6
4
2
0
53
52
51
50
49
48
47
46
45
Percent Percent
Management Occupations (L)Office & Admin. Support Occupations (R)
Higher Wage Jobs Offshore Faster?Percent of U.S. Jobs Lost by Offshoring, 2000 - 2015
Avg. Annual Wage = $82,790
Avg. Annual Wage = $28,260
Occupations that can be offshored,
11.5%
Occupations that cannot
be offshored,
88.5%
Majority of Jobs Cannot be OffshoredCalifornia, 2002
Includes employment in:• Office support (computer operators)• Business and financial support• Computer and math professionals• Paralegals and legal assistants• Diagnostic support services• Medical transcriptions
1.7 million
12.8 million
IT Jobs Displaced in the U.S.Including Jobs Lost & Not Created in 2000 - 2003
400
350
300
250
200
150
100
50
Thousands of Jobs
Total IT Jobs Lost Due to:•Recession•Dot-com Bubble Burst•Productivity Gains•Over-hiring in 1990s•Offshore ITO
IT Jobs Lost or not Created Due to Offshore ITO
372,000
104,000
Computer ProgrammersAverage Salaries, 2003
Country Salary RangePercent to U.S.
Equivalent SalaryPoland & Hungary $4,800 - $8,000 6% - 13 %Russian Federation $5,000 - $7,500 6% - 13%India $5,880 - $11,000 7% - 18%Philippines $6,564 8% - 11%Malaysia $7,200 9% - 12%China $8,952 11% - 15%Israel $15,000 - $38,000 19% - 63%Ireland $23,000 - $34,000 29% - 57%Canada $28,174 35% - 47%U.S. $60,000 - $80,000 100%
Scientists & Engineers in R&DTop 10 Countries by Per Mil. Population, 2003
Rank Country NumberPer MillionPopulation
1 Japan 648,778 5,0952 Finland 26,378 5,0593 Sweden 40,534 4,5114 Singapore 19,737 4,1405 Norway 18,811 4,1126 U.S. 1,201,233 4,0997 Switzerland 26,762 3,5928 Russian Federation 501,621 3,4819 Denmark 18,816 3,47610 Australia 66,775 3,353
50 China 705,689 54572 India 167,414 157
High Technology ExportsTop 10 Countries
Rank CountryUS$
MillionsUS$ per Capita
1 U.S. 178,906 610.52 Japan 99,389 780.53 Germany 85,958 1,042.94 U.K. 67,416 1,118.65 France 67,191 1,112.06 Singapore 62,572 13,123.47 China 49,427 38.28 Malaysia 40,939 1,740.49 Korea (ROK) 40,427 831.910 Netherlands 38,960 2,387.50.029 Russian Federation 3,257 22.633 India 1,680 1.6
Employment by Foreign Firms in U.S.Top 10 States by Number of Employees, 2003
State
US SubsidiaryEmployment
(Thou.)
State Labor Force
(Thou.)
Percent of Labor Force
California 713.5 17,569.9 4.1New York 480.8 9,294.1 5.2Texas 428.1 10,961.5 3.9Illinois 320.9 6,391.6 5.0Florida 303.3 8,301.5 3.7New Jersey 270.8 4,401.4 6.2Pennsylvania 267.1 6,212.7 4.3Michigan 244.2 5,071.2 4.8Georgia 243.8 4,395.9 5.5Ohio 242.2 5,871.9 4.1
2008*20021995
100
80
60
40
20
0
Percent
U.S.Asia**Other
Chip Design ProductionGlobal Share
*Projected
**Taiwan, Korea, India, China, Singapore, and Malaysia
SoftwareSemiconductor
100
80
60
40
20
0
Percent
38%
33%
13%
11%
5%
29%
37%
9%
9%
16%
Bay AreaRest of U.S.IndiaChinaRest of the World
Research Jobs CreatedBay Area-Based Companies
Globally Distributed Production FunctionsHewlett Packard Printer
U.S. India
Hungary China Mexico
Taiwan
Local Local Local
R&D andDesign
ComponentManufacturing
Assembly andTesting
Distribution
Hourly Wages for Selected OccupationsU.S., California, Silicon Valley, and India, 2003
Occupation U.S CaliforniaSilicon Valley India
Telephone Operator $13.48 $14.55 $17.75 Under $1.00Health Record Techs $11.79 $13.11 $15.85 $1.50 - $2.00Payroll Clerk $14.22 $16.28 $21.02 $1.50 - $2.00Legal Assistant $17.15 $19.88 $24.78 $6.00 - $8.00Accountant $23.59 $25.95 $30.60 $6.00 - $15.00Financial Analyst $28.87 $31.65 $36.19 $6.00 - $15.00Programmer $29.49 $34.57 $40.31 $2.65 - $6.00
New cost baseProcess reengineering
Task reengineeringOffshoring location cost
Add management costAdd telecom cost
Factor cost savingsOriginal cost base
120
100
80
60
40
20
0
Index: original cost base in U.S. = 100
100 -65 to -65
+5 to +10+5 45 - 55 -5 to -7
-10 to -15
30 - 35
Offshoring Improves Performance Savings by Offshoring
Task/process migration Task-level improvement
Process-level improvement
45 - 55% Savings 30 - 40% Savings
Offshoring’s Value to the U.S.Benefit Per $1 of U.S. Spending Sent Offshoring, 2002
Savings to US investors/customers $0.58Imports of US goods & services $0.05Transfer of profits by US providers $0.04
Potential Future Benefit
Value from US labor reemployed $0.45-0.47
Net Benefit to the U.S. $1.12-$1.14
Current Direct Benefit Retained
in the U.S.
Offshoring’s Value to IndiaBenefit Per $1 of U.S. Offshore Spending, 2002
Labor $0.10Profits retained in India $0.10
Suppliers $0.09Central Government $0.03State Government $0.01Net Benefit to India $0.33
Offshoring Sector
Taxes
20022001200019991998199719961995
1600
1400
1200
1000
800
600
400
200
0
US$ Millions
India – Offshoring Takes OffRevenues from Business-Process Offshoring in India
British Airways
GECitygroup
TransWorks
Convergys,Daksh,HSBC
HCL Technologies,Speedwing Int.,
Standard CharteredMultinational companies entry
to India
India – Outsourcing Jobs RiseIT & Other Service Jobs
20042003200220012000
600
500
400
300
200
100
0
Thousands
IT WorkersOther Service Workers
2004*2003200220012000
500
400
300
200
100
0
Index 2000 = 100
IT WorkersOther Service Workers
IT & Other Service Jobs in IndiaIndexed Growth, 2000 - 2004
*Estimated
IT ServicesRemote ITTechnologyDomestic Market
35
30
25
20
15
10
5
US$ Billions
Lower EstimateUpper Estimate
India – The World’s Back Office?India’s IT Industry in 2008
Exports
2002200019901980
100
80
60
40
20
0
Percent
AgricultureIndustryServices
India – More Services-OrientedIndia’s GDP by Sector
0201009998979695949392
3.5
3.0
2.5
2.0
1.5
1.0
0.5
1.2
1.0
0.8
0.6
0.4
0.2
0.0
US$ Billions Percent
Value (L)% of US Exports in Services (R)
India Is Buying More U.S. ServicesExports of Private U.S. Services to India, 1992 - 2002
Top 10 U.S. Exporting StatesRanked by 2003 Value, US$ Billions, 2001 - 2003
Rank State 2001 2002 2003Change 2002-03
1 Texas 95.00 95.40 98.85 3.6%2 California 106.78 92.21 93.99 1.9%3 New York 42.17 36.98 39.18 6.0%4 Washington 34.93 34.63 34.17 -1.3%5 Michigan 32.37 33.78 32.94 -2.5%6 Ohio 27.09 27.72 29.76 7.4%7 Illinois 30.43 25.69 26.47 3.1%8 Florida 27.18 24.54 24.95 1.7%9 Massachusetts 17.49 16.71 18.66 11.7%10 Louisiana 16.59 17.57 18.39 4.7%
689.5 658.8 688.6 4.5%United States
040302010099
150
140
130
120
110
100
90
Index 1999Q1 = 100
CaliforniaUnited States
Exports - Indexed Growth1999 - 2004Q2
California ExportsTop 10 Countries by 2003 Value
Percent Share2002 2003 Change CA Exports
Rank Country (US$ Bil.) (US$ Bil.) 2002-03 20031 Mexico 16.1 14.9 -7.5% 15.8%2 Japan 11.1 11.8 5.8% 12.5%3 Canada 10.1 11.2 11.5% 11.9%4 China 4.5 5.5 21.9% 5.8%5 Korea (ROK) 4.7 4.8 2.6% 5.1%6 Taiwan 5.4 4.4 -17.6% 4.7%7 U.K. 4.3 4.4 0.3% 4.6%8 Hong Kong 3.7 4.2 13.4% 4.4%9 Germany 3.5 3.6 2.3% 3.8%
10 Netherlands 3.6 3.4 -4.6% 3.6%25.3 25.9 2.4% 27.5%92.2 94.0 1.9% 100.0%
All OthersCalifornia Total
California’s Top 10 ExportsBy Industry, 2003
Rank Industry
2003 Value
(US$ Bil.)
Share of CA Total Exports
Share of US Industry
Exports1 Computer & Electronic Products 36.71 39.1% 25.1%2 Machinery Except Electrical 9.43 10.0% 13.0%3 Transportation Equipment 8.64 9.2% 6.9%4 Chemicals 5.96 6.3% 6.6%5 Misc. Manufactured Commodities 4.88 5.2% 17.3%6 Agricultural Products 4.78 5.1% 16.3%7 Food And Kindred Products 4.17 4.4% 15.6%8 Electrical Equipment & Components 2.94 3.1% 13.1%9 Fabricated Metal Products 2.30 2.4% 12.1%
10 Plastics & Rubber Products 1.58 1.7% 9.9%
200420032002200120001999
150
140
130
120
110
100
90
80
70
Index 1999Q1 = 100
CaliforniaUnited States
Exports - Computer Equipment1999 - 2004Q2
200420032002200120001999
130
120
110
100
90
80
70
60
50
Index 1999Q1 = 100
CaliforniaUnited States
Exports - Apparel Products1999 - 2004Q2
200420032002200120001999
170
160
150
140
130
120
110
100
90
Index 1999Q1 = 100
CaliforniaUnited States
Exports - Chemicals1999 - 2004Q2
20032002200120001999
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
US$ Thousands
CaliforniaUnited States
Exports Per WorkersCalifornia & U.S., 1999 - 2003
200420032002200120001999
40
38
36
34
32
30
28
26
24
Percent
CaliforniaUnited States
Exports to NAFTA Members*As Percent of Total Exports
*Canada and Mexico
200420032002200120001999
26
24
22
20
18
16
Percent
CaliforniaUnited States
Exports to European UnionAs Percent of Total Exports
200420032002200120001999
50
45
40
35
30
25
20
Percent
CaliforniaUnited States
Exports to Asia*As Percent of Total Exports
*Japan, Taiwan, Korea, China, Hong Kong, Singapore, Malaysia, Thailand, Philippines, India
200420032002200120001999
160
140
120
100
80
60
40
Index 1999Q1 = 100
NAFTASouth AmericaE.U.AsiaAfrica
California Exports to the WorldIndexed Growth by Foreign Region, 1999 - 2004Q2
OHGAMIPANJFLILTXNYCA
140
120
100
80
60
40
20
800
700
600
500
400
300
200
US$ Billions Thousands
Property, Plant & Equipment (L)Employment (R)
Foreign Direct Investment to U.S. StatesTop 10 States by Employment, 2001
0100999897969594939291
130
120
110
100
90
80
750
700
650
600
550
500
US$ Billions Thousands
Property, Plant & Equipment (L)Employment (R)
Foreign Direct Investment to CaliforniaProperty, Plants & Equipment / Employment, 1991 - 2001
California’s Agricultural ExportsTop 10 Commodities by 2002 Value
Rank Country
2002 Value
(US$ Mil.)
Share of CA Agr. Exports
Percent Growth
2001-20021 Almonds 829.0 15% 20.9%2 Cotton 513.5 10% -14.8%3 Wine 485.7 9% 2.3%4 Table Grapes 367.3 7% -6.9%5 Oranges 303.0 6% 1.8%6 Dairy 300.9 6% -11.1%7 Tomatoes* 215.4 4% 1.7%8 Walnuts 183.9 3% 2.7%9 Rice 183.0 3% 10.0%
10 Beef & Products 167.7 3% 8.3%3,549 66% 0.5%5,374 100% -0.8%
Top 10 TotalAll Total**
*Processed Tomatoes **50 principal commodities
India, 2%
Indonesia, 2%
Mexico, 6%China, 7%
Japan, 17%
E.U., 21%
Canada, 23%
Taiwan, 4%
Korea, 5%
Malaysia, 1%
California’s Agricultural Export MarketsTop 10 Destinations, 2002
0302
0100
9998
9796
9594
9392
9190
8988
8786
8584
83
350
300
250
200
150
100
50
0
US$ Billions
ExportsImports
U.S. Trade in ServicesExports and Imports, 1983 - 2003
Passenger Fares, 5.1%
Other Transport.,
10.4%
Royalties & License
Fees, 15.7%
Travel Services,
21.0%
Other Private Services,
43.5%
US Gov. Misc.
Services, 0.3%
Transfers under US Military
Contracts, 4.1%
U.S. Exports in ServicesBy Category, 2003
U.S. Exports in Services1999 and 2003
Category1999
(US$ Bil.)2003
(US$ Bil.)
PercentChange
1999-2002Other private services 98.2 133.8 36.3%Royalties & license fees 36.9 48.2 30.7%Other transportation 26.9 31.8 18.3%US Government Misc. Services 0.9 0.8 -8.5%Travel services 74.7 64.5 -13.7%Passenger fares 19.8 15.7 -20.7%Transfer under US Military 15.8 12.5 -21.0%Total Exports in Services 273.2 307.4 12.5%
ChinaMexico
IndiaPhilippines
IndonesiaArgentina
FranceJapan
U.K.U.S.
1500
1000
500
0
-500
Thousands
Net Legal ImmigrationSelected Countries, Avg. Annual, 1995 - 2000
FranceItaly
JapanU.K.
U.S.Canada
AustriaAustralia
GermanyNew Zealand
700
600
500
400
300
200
100
0
Number of Foreign Workers
Inflow of Foreign WorkersPer 100,000 Residents
U.S. H-1B Visa Petitions ApprovedTop 10 Country of Birth, 2002
Country Total PercentIndia 64,980 33.0%China 18,841 9.6%Canada 11,760 6.0%Philippines 9,295 4.7%U.K. 7,171 3.6%Korea 5,941 3.0%Japan 4,937 2.5%Taiwan 4,025 2.0%Pakistan 3,810 1.9%Columbia 3,320 1.7%
U.S. H-1B Visa Petitions ApprovedTop 5 Occupation Group, 2002
Country Total PercentComputer-Related 75,114 38.3%Architecture/Engineer/Survey 25,197 12.8%Administrative Specializations 21,103 10.8%Education 20,613 10.5%Medicine &Health 12,920 6.6%
Domestic Migrants LossesTop 10 States by Net Domestic Migration in 2000 - 2003
Rank State1991-1999 (Thous.)
2000-2003 (Thous.)
1 New York -1,836 -6732 California -2,152 -3063 Illinois -545 -2854 Ohio -162 -1295 New Jersey -365 -1126 Massachusetts -232 -1087 Michigan -194 -908 Louisiana -129 -899 Kansas -14 -4410 Pennsylvania -248 -44
Immigrant Magnet StatesTop 10 States by Net Immigration in 2000 - 2003
Rank State1991-1999 (Thous.)
2000-2003 (Thous.)
1 California 2,222 1,1342 New York 1,078 5303 Texas 700 5144 Florida 630 4195 Illinois 376 2586 New Jersey 369 2287 Georgia 104 1448 Arizona 104 1269 Massachusetts 143 12510 North Carolina 57 114
2000-20031990's1980's1970's1960's1950's1940's
3000
2000
1000
0
-1000
-2000
-3000
Thousands
Net Domestic MigrationNet Immigration
California’s Migration & ImmigrationHistorical Trend
2000-20031990's1980's1970's1960's1950's1940's
80
60
40
20
0
-20
-40
-60
Percent Growth
Net Domestic MigrationNet Immigration
California’s Population Growth RateBy Net Domestic Migration and Net Immigration
02010099989796959493929190
20
18
16
14
12
10
8
6
4
Thousands
India (L)China (R)
Legal Immigrants to CaliforniaFrom China & India, 1990 - 2002
03020100999897
2.2
2.0
1.8
1.6
1.4
1.2
1.0
70
60
50
40
30
20
US$ Billions US$ Billions
India (L)China (R)
California’s Imports from China & India1997 - 2003
California Employment-based ImmigrantsBy Country of Birth, 2002
Rank Country Number Percent1 India 5,716 27.92 China 2,857 13.93 Philippines 1,665 8.14 Mexico 1,633 8.05 Korea 996 4.96 Taiwan 753 3.77 U.K. 691 3.48 Canada 569 2.89 Japan 497 2.410 Iran 366 1.8
Bush vs. Kerry on Immigration2004 Presidential Election
Bush: (1) Proposes granting legal status to illegal workers. (2) Plan would give temporary legal status for highly skilled
foreign workers & farm labor. (3) Opposes giving illegal immigrants an “automatic path to
citizenship.”
Kerry: (1) People who have been in the U.S. at least five years, paid
taxes and “stayed out of trouble ought to be able to translate into an American citizen immediately.”
(2) Reward students who study hard and play by the rules
Kerry’s International Tax Reform2004 Presidential Election
Actions:
• Fundamental Reforms America’s International Tax System
• Eliminates Tax Breaks for Companies that Create Jobs Overseas
• Using the Approximately $12 billions in Annual Savings to Cut the Corporate Tax Rate
Goal:
• End Tax Breaks that Encourage Companies to Move Jobs Overseas
• Close Abusive International Tax Loopholes
• Cut the Corporate Tax Rate by 5 Percent
Offshoring is Not New, Rather a Well Established Practice
Offshoring is Not New, Rather a Well Established PracticeOffshoring by Bay Area Semiconductor & Software Companies (2004)Offshoring by Bay Area Semiconductor & Software Companies (2004)
Comparatively, 66% of U.S. companies were using offshore resources in 2003
Using Offshore Resources
94%
Not Yet Offshoring3%
Exploring OffshoreStrategies
3%
Five Key Trends are Impacting Regions and Job Markets
Five Key Trends are Impacting Regions and Job Markets
• High productivity growth• Acceleration of offshoring• New markets
• Increased competition and access for workers
• Job mobility
Fundamental Shifts in Global Business Climate
DemographicChange
DemographicChange
BusinessDisintermediation
BusinessDisintermediation
Shift FromManufacturing
to Services
Shift FromManufacturing
to Services
TechnologyDriven
Productivity
TechnologyDriven
Productivity
GlobalizationGlobalization
Macro Trends Industry Trends Worker Trends
To Help Understand How the Job Profile is Changing We Identified Key Capabilities the Region is Competing On…
To Help Understand How the Job Profile is Changing We Identified Key Capabilities the Region is Competing On…
1. Mass production2. Back-office operations3. Product and process
enhancement
1. Entrepreneurship/new business creation
2. Research in advanced technologies
3. Concept and market development
4. Cross-disciplinary research5. Global integrated
management
Competitive Bay Area Capabilities
Challenged Bay Area Capabilities
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7
Semiconductor and
Semiconductor Equipment
Manufacturing
Computer and Communications
Hardware ManufacturingSoftware
Biomedical
Pay
roll
Con
cent
rati
on R
atio
: %
of P
ayro
ll/%
of E
mpl
oym
ent
Bay Area Employment Concentration Relative to the US
…And Looked at the Region’s Position in Emerging Technologies…And Looked at the Region’s Position in Emerging Technologies
Industry Cluster ConcentrationIndustry Cluster Concentration
Other US Biotech firms
= 657
Bay Area Biotech Firm Concentration, (2004)Bay Area Biotech Firm Concentration, (2004)
Bay Area Biotech firms
= 800
Bay Area Nanotech FirmConcentration, (2004)Bay Area Nanotech FirmConcentration, (2004)
7%5%
4% 4% 4%
9%
Bay Area Germany Japan Canada Switzerland UK
Based on Its Capabilities and Lead in New Technologies the Region will Generate Jobs in Innovation and New BusinessesBased on Its Capabilities and Lead in New Technologies the Region will Generate Jobs in Innovation and New Businesses
Global Integrated Management
Entrepreneurship/ New Business Creation
Research in Advanced Technologies
Cross-disciplinary Research
Product and Process Enhancement
Mass Production
Back Office Operations
Sustain/ Manage
Scale/Grow
Business
Startup/Businesslaunch
Idea Generation/ Conceptualization
Concept and Market Development
Large Semi and SW Companies Still Plan to Hire Locally
Large Semi and SW Companies Still Plan to Hire Locally
Bay Area
Other US
Rest of World
18%
39%
43%
Total Employment Distribution (2004)Total Employment Distribution (2004)
Bay Area
Other US
Rest of World
27%
38%
35%
Job ListingsDistribution (2004)
Job ListingsDistribution (2004)
Based on Job Postings, 1 in 4 future hires are targeted for the Bay Area
Research Job Prospects Remain Strong in the Bay Area…
Research Job Prospects Remain Strong in the Bay Area…
Research Job Listing for Large Bay Area Based EmployersResearch Job Listing for Large Bay Area Based Employers
38%
33%33%
13%13%
11%11%5%5%
29%
37%37%
9%9%9%9%
16%16%
Bay Area
Rest of US
Rest of the World
IndiaChina
• Bay Area is center for cross-disciplinary and advanced research
• Most small companies keep research in Bay Area
• Medium and large companies keep the bulk of their innovation in the region
Semiconductor Software
…However, Even in the R&D Value Chain Some Select Activities Are Migrating Offshore
…However, Even in the R&D Value Chain Some Select Activities Are Migrating Offshore
Research and Development Value ChainResearch and Development Value Chain
Concept Development
Requirements Definition
Design Validation
Prototypingand Product Development
Applied Research
Basic Research
= Expect to be increasingly offshored or outsourced
For research jobs across the local Semiconductor and Software industry, positive job creation is expected
Keep In Mind, Offshoring is Also Creating New Types of Occupations
Keep In Mind, Offshoring is Also Creating New Types of Occupations
Remote project management capabilities are in high demand and can command a 25% premium
Advanced Technology Group (ATG) Engineering Manager
•Based in San Jose, CA and will manage the Digital Imaging Technology Group in India.
•The group consists of Senior Computer Scientists who will focus on advanced technology R&D in the Digital Imaging Market.
•Will prioritize research activities, evangelizing technologies developed to product groups, plan the transfer of technology, and coordinate research activities within the US technology group.
Global Integrated Management Position ? Adobe Sample New Job Listing
Overall, Expect Bay Area Jobs to Change Based on The Competitive Position of the Region’s Capabilities
Overall, Expect Bay Area Jobs to Change Based on The Competitive Position of the Region’s Capabilities
Sample Occupations Aligned with Weaker Capabilities
• High tech manufacturing and assembly (except high-end)
• Office support (e.g., data entry clerks, etc.)
• Business and financial support (e.g., processing staff)
• IT support specialists• IT administrators• Legal assistants• Statistical analysts• Entry-level computer and software
engineers• Quality assurance and test engineers• Product and process engineers
• Venture capitalists, lawyers entrepreneurs
• IT, biotech and nanotech R&D professionals
• Architects, systems level software engineers
• Select engineering including electrical, mechanical and electronics
• Strategic managers in sales and marketing
• Product marketing managers• Managers of global teams and assets
(headquarters, product development, IT, HR, etc.)
Sample Occupations Aligned with Leading Capabilities
However, net job creation is expected for the Bay Area Economy
Key TakeawaysKey Takeaways
n Offshoring is not new, but rather a well established business practice
n Global trends are impacting regions and job markets
n The regional job profile is complex and requires understanding the business capabilities that drive it
n The Bay Area’s competitive capabilities and leadership in emerging technologies position it well for innovation and new business creation
n Overall, expect continued change in types of jobs, but net job creation to the Bay Area economy
n Policy direction should focus on:• Sustaining the region’s competitive capabilities • Addressing needs of the supporting business environment• Encouraging business leaders to “share the load” of job transitions
n Offshoring is not new, but rather a well established business practice
n Global trends are impacting regions and job markets
n The regional job profile is complex and requires understanding the business capabilities that drive it
n The Bay Area’s competitive capabilities and leadership in emerging technologies position it well for innovation and new business creation
n Overall, expect continued change in types of jobs, but net job creation to the Bay Area economy
n Policy direction should focus on:• Sustaining the region’s competitive capabilities • Addressing needs of the supporting business environment• Encouraging business leaders to “share the load” of job transitions
The Economics of OffshoringAre Compelling
The Economics of OffshoringAre Compelling
Original cost base
Factor cost savings
Additional telecom cost
Additional manage-ment cost
Offshore location cost
Task reengi-neering
Process reengi-neering
New cost base
Task/process migration Task-level improve-ments
Process-level improve-ments
45-55% saving 30-40% savings on offshore cost base
100
6060--6565
55--1010 5545-55
55--771010--1515 30-35
California Has More Costly Labor, Energy, Tax Costs Than Neighboring & Manufacturing States*California Has More Costly Labor, Energy, Tax
Costs Than Neighboring & Manufacturing States*Index 100 = U.S. average (2002)
* Top 8 manufacturing states and 5 neighboring states** Measured as labor wages per unit output
102.2
101.8
99.9
97.1
94.3
91.0
89.7
103.0
103.1
103.4
105.9
113.2
117.0California
Michigan
New York
Pennsylvania
Washington
Illinois
Nevada
Ohio
Arizona
Texas
Utah
Oregon
North Carolina
Total index
100.9
101.2
99.6
99.0
96.8
91.1
89.9
104.5
107.5
103.8
97.8
116.7
109.1
Unit labor cost**
115.0
99.1
102.4
96.8
72.6
80.1
86.4
101.2
78.0
109.3
132.5
102.6
160.9
Energy cost
93.1
110.5
97.9
82.5
108.7
106.4
92.8
95.0
107.8
91.9
126.8
103.3
110.0
Tax burden
0.33
* Estimate based on historical U.S. reemployment trends
The Real Economics of OffshoringThe Real Economics of Offshoring
• Taxes ($0.04)• Revenues
($0.20)• Local suppliers
($0.09)
. . . deliversvalue to India . . .
0.67
• Cost savings ($0.58)
• Goods/ services sold ($0.05)
• Profits from Indian ventures ($0.04)
. . . brings savings and returnsto U.S. . . .
1.45-1.47
. . . and makes the global pie that much bigger
0.45-0.47
. . . creates new value from reemploying U.S. labor* . . .
$1 previouslyspent in U.S.,now offshored to India . . .
$1.00
0.45-0.47
0.05 0.040.58
1.12-1.14
0.67
U.S. Economy Generates Net Additional Value From Every Dollar of Spend Offshored
U.S. Economy Generates Net Additional Value From Every Dollar of Spend Offshored
Savings accrued to U.S. investors and/or customers
Import of U.S. goods and services by providers in India
Transfer of profits by U.S. providers in low-wage countryto parent
Value potential to the U.S. from $1 of spend offshored to IndiaDollars; 2002
Total direct benefit retained in the U.S.
Value from U.S. labor reemployed** (conserva-tive estimate)
Potential for total value creation in the U.S. economy (conservative estimate)
Current direct benefit* Potential future benefit
* Estimated based on historical reemployment trends from job loss through trade in the U.S.
Further value creation potential through• Increased global competitiveness of U.S.
business • Multiplier effect of increased national
savings
Further value creation potential through• Increased global competitiveness of U.S.
business • Multiplier effect of increased national
savings
Job Creation Will Outpace OffshoringBy A Wide Margin
Job Creation Will Outpace OffshoringBy A Wide Margin
22
-2
Employment, 2000-2010, Millions
Services jobs offshored
Net new jobs created
Financial capital
Physical Infrastructure
Quality of life
Tax and regulatory
Technology access
Skilled workforce
Foundations of the OffensiveFoundations of the Offensive
The California Power Crisis Will Cost The State More Than $56 Billion By 2013
The California Power Crisis Will Cost The State More Than $56 Billion By 2013
5.8
3.94.3
24.8
56.3
6.8
10.8
US$ Billions (2000 dollars)
* CA DWR costs shown are current are through December 2003 and include energy and capacity costs only and do not include bond charges, reserves, administrative and other costs
** Contract costs are estimates as of September 2004 and may vary based on natural gas prices, contract utilization and future contract renegotiations
PG&E Bankruptcy
SCE Bankruptcy
California DWR power procurement costs incurred*
CPUC Bankruptcy settlements
California DWR long term contract obligations (2004-2013)**
2003 power costs
2002 power costs
2001 power costs
Including the economic impact of consumer and business confidence and
the 2000 blackouts, the actual cost to the state is
even higher
9.9
8.7
6.5
5.45.8
3.8
2.7
6.9
The Risk of Future Shortages is High
* Operating reserve margin calculated as (Available Supply – Peak Demand)/(Peak Demand)** As much as 2,000 MW would be required to maintain a planning reserve margin of 15% for the 1-in-5 case,
which would equate to a 1-in-2 operating reserve of 12.1% and a 1-in-5 operating reserve of 9.1%
1 in 5 year
1 in 2 year
BAEF ESTIMATE
7% target = Stage One emergency level
• 750 MW of new capacity will be needed before 2006 to maintain a 7% operating reserve under a 1-in-5 case**
• Given the lead time for new construction, permitting and demand side management needs to begin today
August 2005 August 2006 August 2007 August 2008
Projected California state operating reserve margin*, Percent
5% target = Stage Two emergency level
Demand
Doctor’s Degrees ConferredUnited States
Non-Resident AlienAmerican Indian
AsianHispanic
BlackWhite
100
80
60
40
20
0
Percent
1976-19772000-2001